There’s a deluge of hype around Bitcoin and blockchain technologies right now, and policymakers and regulators in the Caribbean are doing their best to wrap their heads around the advantages and disadvantages of this virtual currency. Similar questions are being contemplated in the ICTs for development (ICT4D) community, taking into account that electronic money (e-money) platforms such as Safaricom’s M-PESA have essentially solved the financial inclusion quandary for millions of people in Kenya. The service has now even expanded to Eastern Europe, Afghanistan, and India.

Besides sharing the characteristic of being digital, how do Bitcoin and e-money compare, especially with regards to reaching individuals who have previously been unable to access traditional financial services? Presently, there appear to be more differences than similarities between the two, and it’s critical not to confuse virtual currency with e-money.

Blockchain, in brief, is a record of digital events, distributed across multiple participants. It can only be updated by consensus between participants in the system, and when new data is entered, it can never be erased. The blockchain contains a true and verifiable record of each and every transaction ever made in the system. Launched in 2009, Bitcoin is a virtual, private currency that uses blockchain as an underlying, immutable public ledger. Bitcoins are ‘mined’ using distributed processing power across a global network of volunteer software enthusiasts. The supply mechanism is designed to grow slowly and has an upper limit of 21 million units as determined by a built-in algorithm. There is no central authority that controls blockchain or Bitcoin. There are no central banks that can be politically manipulated; and no way to inflate the value of a national currency by simply printing more money. Economic libertarians are ecstatic at the very thought of this. However, competing virtual currencies can be created that could have the net effect of devaluing the original.

Contrastingly, e-money is not a separate currency and is overseen by the same national regulatory authority that governs the printing of fiat money – as is the case with M-PESA and the Central Bank of Kenya. It’s an extension of a national currency like Jamaican dollars or Netherland Antilles guilders for use over digital networks to reduce the costs associated with handling physical cash. More specifically, it’s a one-to-one electronic store of value pegged to the cash receipt of the equivalent amount. To mitigate against risks like money laundering, terrorist financing, consumer protection, etc., the cash against which e-money is issued most often has to be deposited with fully regulated financial institutions.

The issue of financial exclusion

The issue of financial exclusion can be summarized into two categories: unbanked and underbanked. Unbanked individuals do not have an account at a regulated financial institution, while underbanked individuals have accounts, but frequently use alternative or unregulated financial services.

Before elaborating on the key factors behind financial exclusion, it is important to detail the effects of being unbanked to illustrate the severity of the problem. Unbanked individuals are faced with a heavy economic burden when conducting even the most basic financial transactions. For example, cashing a cheque can cost the average person with full-time employment as much as USD$20,000 over his/her lifetime. Retailers, which several people use for check cashing, charge non-trivial fees. For example, charges can be as high as USD5$ for cashing a check. Other alternative financial services providers employ even more extortionary fee structures. Western Union, as an example, charges as much as USD$42 to send a USD$500 remittance to Barbados. ‘Underground’ alternative financial service providers levy as much as USD$10 on every USD$100 transferred. All in all, fees for conducting basic transactions can accrue large costs. And given that the majority of unbanked households are low- and medium-income families, this significantly reduces the monies available for daily consumption.

There are numerous interwoven reasons, both from the customer and supplier end, which contribute to the overall dilemma of financial exclusion. Fundamentally, the decision on whether or not to open a bank account can often be attributed to the volatility and quantity of the individual’s earnings. This means the more volatile a person’s income is, the higher the chance they are unbanked. Simply put, they are large numbers of Caribbean nationals who do not have enough money to maintain a bank account. As the majority of banks require a mandatory minimum deposit to open an account, as well as an average balance to avoid monthly services fees, an inadequate and/or inconsistent flow of income automatically serves as a barrier to using banking services for low-income earners who live paycheck to paycheck. Initially, this may seem paradoxical as alternative financial services are very expensive, yet they are primarily used by low-income individuals. Nonetheless, it must be acknowledged that alternative financial services do not have strict requirements for maintaining a consistent account balance, and consequently are easier to access up front. The high costs of alternative financial services accumulate due to prolonged usage, or at the conclusion of a lending agreement, whereby the interest rates are regularly double or triple of those offered by traditional banks. Basically, the cost of regular bank accounts is known in advance of setting up an account, whereas the true cost of alternative financial services emerges over time. This is a major reason that alternative financial services are more appealing to low-income households.

Another reason for unbanked individuals is attitudinal and behavioral; they really do not trust banks. A large percentage of them believe that banks are not in any way interested in serving their needs. This sentiment may not be all that unfounded, as a number of the banks across the Caribbean region have been reducing the teller services that unbanked individuals are familiar with and prefer, forcing more (non-technical) customers to online channels, regularly increasing service fees, and even worse, looking to divest their retail operations in favor of corporate banking and wealth management business units. Even though the commercial reasons may be legitimate, these types of actions are not improving the already unfavorable views of traditional banks.

However, it must be emphasized that the reasons for being unbanked are not restricted to consumers. The actions, or rather inaction, of private sector commercial banks play just as large of a role in the issue. The prior discussion of low-income households being unable to obtain bank accounts due to the high minimum balances highlights the unavailability of inexpensive banking options for this specific market segment. The commonly held belief is that banks lose too much money in servicing accounts for low-income individuals to make them a valuable market. Actually, one can forcefully contend that banks are pricing their products intentionally to keep these customers away. For example, as of June 2017, CIBC FirstCaribbean (Barbados) charges a $15 monthly service — in addition to various other transactional fees — and offers to waive the fee for customers who can maintain an average balance of $1,000. These types of pricing structures and expectations are difficult for poor people to meet.

Why Bitcoin isn’t a financial inclusion panacea

Bitcoin currently has no formal strategy or roadmap to guarantee, for instance, that even at its current rate of adoption, it can replace the variety of fiat currencies across the region. Investment is key to solving these types of problems. However, in quantitative terms, investment in the Internet at its nascent stages was several orders of magnitude greater by comparison.

There is a lot of controversy around attempts to regulate Bitcoin. It is not very clear to what social and economic areas and most importantly, to what extent the state or agencies will be admitted into the development process to design compliance into the system. One theoretical problem lies in the fact that blockchain’s main strengths (security, legitimacy, privacy, safety and availability) are patterned off a set of algorithms — math, cryptography and distributed computing.

Renowned writer and amateur cryptographer Edgar Allan Poe once stated “… it may be roundly asserted that human ingenuity cannot concoct a cipher which human ingenuity cannot resolve… Thus, what is encrypted by one person, can always be decrypted by another.” Similar thought processes have led many security experts to claim that Bitcoin is one major hack away from total failure (can anyone say ‘quantum computing’?). My concerns about Bitcoin’s future, and more importantly its status as a solution for financial inclusion, are nowhere close to being so ominous or skeptical. In the sections that follow, I will fully outline why I think Bitcoin has a long way to go before it solves the financial inclusion dilemma in the Caribbean region.

To obtain Bitcoin, you must already be “economically included” — both in terms of Internet and financial access. Let’s be very honest here; the average unbanked or underbanked individual is not mildly interested in the highly technical and costly process of mining Bitcoin. In terms of investing in Bitcoin, individuals participate based on trust in the private currency and at their own risk (speculative investment is usually not the realm of low- to medium-income earners). The exchange rate of Bitcoin to US dollars has fluctuated wildly in its short existence. Once you have discretionary income available and use debit or credit cards to purchase Bitcoins on a cryptocurrency exchange such as Coinbase or BitStamp, Bitcoin has two characteristics of traditional money: when you buy products or services at participating merchants, transactions are largely anonymous and irrevocable. Again, free market advocates love this, but it garners unnecessary attention from tax agencies and law enforcement.

Anonymity is a deliberate choice for the unbanked. Simply put, the unbanked live in a cash-driven economy. They prefer to remain anonymous for a bevy of reasons: immigration status, tax purposes, fear, or general mistrust of banks. One of the ways to remedy this is to overhaul the burdensome regulations linked to closed networks like Western Union and MoneyGram to permit the unbanked to utilize completely anonymous platforms. Onerous rules are stymying advancements in digital movement of money because they were developed for a bygone era. For the cloud over the industry to disappear, efforts need to be made to vanquish the idea that anonymous money sending is only for terrorists and criminals. Allowing $100 in cash to move anonymously helps a poor farmer a lot more than it does an ISIS jihadist. The belief of libertarians that money will become totally anonymous, absent of any oversight or intervention by government and regulators, is illusory. The ultimate objective is to deploy technology that empowers individuals, but in tandem we need common institutions like the judiciary and regulators that protect consumers and the integrity of the currency that drives the economy. At the end of the day, millions of people aren’t going to discard the existing financial system in favor of Bitcoin on faith alone.

Predatory businesses are convenient where the unbanked live. Rural areas like Trelawny, Jamaica or Mayaro, Trinidad are home to large swathes of unbanked households. Traditional banks don’t see a viable business case for locating a branch or satellite office in such districts. This means that check cashing and money changing businesses that charge exorbitant rates are the only real means of conducting transactions. New concepts like human ATMs are popping up in locations such as Hong Kong where low-income individuals can send money home, and where several minor Bitcoin remittances players have been successful. However, like rural areas in the Caribbean, these are small markets that are in no way appealing to large banks or major investors. Kenya’s M-PESA succeeded because it leveraged an existing network of agents and vendors. Bitcoin does not preclude the need for extensive networks of agents in remote locations who can provide physical cash to those seeking remittances in a local currency. There are also questions about the viability of Bitcoin in countries with poor technology infrastructure (i.e. poor cellular coverage or lack of broadband Internet in rural areas).

Traditional banks need to come to the table. Traditional banks in the Caribbean have shown little to no interest in embracing Bitcoin or distributed ledger technologies. They see it as a threat to their monopoly over transaction-based services, instead of as an opportunity to revolutionize their operations. Globally, mobile banking is overtaking branch-centered activity more and more – for example, in Norway, 91% of the population use online banking channels. The explosion of fintech companies that are ‘unbundling’ traditional banking functions, added to the maturity of the first generation of Internet banking solutions, are hastening this trend. Consequently, the amalgamation of omni-channel banking, fintech platforms, and open APIs are obscuring the lines between traditional and alternative finance. New banking institutions such as Skandiabanken, are making strides towards accepting Bitcoin and its altcoins as trustworthy assets. If this trend is sustained, expect cryptocurrencies to become more firmly implanted in the evolving fintech landscape. Legislators will then be under pressure to formulate comprehensive proposals for regulating a new asset class. It will also have the net effect of encouraging the development of the next generation of cryptocurrency-based services.

Bitcoin maybe better off as a back-office solution. The transparency and auditability features of distributed ledger technologies like Bitcoin could address a number of different challenges in the financial services industry. It could address the de-risking issues that are seriously impacting the Caribbean region. It could reduce compliance expenses, given that banks and other financial institutions need such personnel to ensure that regulatory requirements are being met or to respond to regulator audits. It serves up the potential of instantaneous movement and settlement of funds, which is appealing to merchants with regards to working capital requirements, given they presently have to wait 2-3 days for each payment. As it pertains to customer service costs, fraud reduction decreases the number of incoming calls, and improved auditability lends to faster responses to customer queries. For instance, utilizing Bitcoin at the core of a payment gateway that integrates with existing core banking applications to facilitate international wire transfers, would result in significant cost savings (it would also eliminate the need for correspondent banks and provide real competition for the monolith that is SWIFT). Combining these savings with others would allow financial institutions to better service lower income customers. Akin to the underlying protocols behind email, Bitcoin can drive common services, and users will never have to interface with it.

Smaller countries do not have Bitcoin liquidity. Many fintech startups have failed because emerging economies – especially small island developing states (SIDS) – have serious challenges with Bitcoin liquidity. For example, there are some realistic obstacles that weaken Bitcoin’s efficacy as an apparatus for remittances. Remittances demand that a liquid market exists between Bitcoin and the receiving nation’s currency. Liquid currency markets tend to be strongest in countries with robust market institutions and entrenched local intermediaries. Countries that depend on remittances usually don’t have such institutions for their national currency, far less a totally new virtual currency. This is why the leading mobile money players are focusing on airtime top-ups, bill payment, and peer-to-peer (P2P) transfers. These are alternative forms of value that can surface in countries lacking adequate infrastructure or access to cryptocurrencies and immediately help the poorest. Many of these applications can run on feature phones and use basic SMS technology to enable movement of digital value. It will take a long time before the really poor become familiar with Bitcoin, and even longer for them to actually care about it. Conversely, Bitcoin ought to be the shining star in the constellation of financial inclusion, and fintech should be engaging in the heavy lifting to develop policies today that will positively impact everyone, not just the wealthy.

Financial inclusion is more than remittances.If I got a dollar for every Bitcoin enthusiast who waxes poetically about ‘Bitcoin’, ‘financial inclusion’ and ‘remittances’, I would be a wealthy man. The truth of the matter is that financial inclusion is a complex issue, difficult to evaluate due to the diverse viewpoints that have to be considered to understand and quantify it. While there is no de facto definition of financial inclusion, there are three elements that are most important: access, use, and quality of financial services. Moreover, besides remittances, financial inclusion also includes micro-credit, micro-insurance, cooperatives, peer-to-peer lending, rural/agricultural credit, mobile money, mobile vouchers, and a number of other alternative financial services. Financial inclusion is multi-faceted, and Bitcoin has yet to distinguish itself in any of the aforementioned categories. What it does is position itself as a potential alternative payments system, but it has yet to effectively demonstrate how it will deliver financial inclusion tangibly and comprehensively.

From the architecture and engineering perspectives, Bitcoin is not a ‘finished product.’ The cost of Bitcoin transactions depends on network demand and capacity at a given time. While the number of transactions employing Bitcoin have gradually risen in the last couple of years, the processing capacity of the network (that is, the volume of transactions that can be processed per second) has remained static. In layman’s terms: If transaction volumes continue on this steady trajectory without a corresponding increase in processing capacity, transaction fees will quite possibly surpass those of traditional banking services. Additionally, wait times for transactions to be completely processed have become increasingly unreliable. Contributing to these performance issues are the built-in limits on the number of transactions that can be processed at a given time. Bitcoin was not built to successfully scale, due to all their transactions and smart contracts existing on a single public blockchain, rather than on state channels. State channels are a two-way transaction channel between users or between machines. The problem of how to increase the processing capacity of the network, while simultaneously preserving its critical decentralized features, is one that needs a near-term resolution. These early ‘teething problems’ emphasize some of the important architecture and engineering decisions that have to be made before Bitcoin can be viewed as a reliable platform for the world’s poorest.

The Caribbean region has serious online trust issues. Trust is a social, economic and political binding instrument. When trust is absent, all kinds of societal afflictions unfold – including paralyzing risk-aversion. In 2016, OAS and IDB published a report titled, ‘Cybersecurity: Are We Ready in Latin America and the Caribbean?’ Researchers conducted assessments of 13 Caribbean nations, including Bahamas, Barbados, Jamaica, and Trinidad & Tobago. The methodological framework covered ‘Culture & Society’, and one of the key findings was the extremely low levels of online trust in the region. More specifically, very high percentages of the populations in the countries surveyed did not trust the Internet as a whole. When you drill down into the data, the findings are even more alarming: Caribbean people do not trust that their online activities aren’t being monitored, they do not trust their service providers, they do not trust social networks, they do not trust their search engine provider, they do not trust companies to keep their personal data safe and secure, and most relevant — they do not trust online and mobile banking platforms. Culture is extremely difficult to change; it comprises an interlocking set of goals, roles, processes, values, practices, attitudes and assumptions. It is essentially the DNA of a country. Tossing all other issues aside, getting the residents of Caribbean nations to trust in Bitcoin may be the hardest obstacle to overcome.

Conclusion

History has shown that two factors affect how a foundational technology and its commercial applications evolve. The first is novelty – the extent to which any technological use case is new to a market or to the world at-large. The more novel it is, the more effort needs to be expended on ensuring that consumers understand what problems it realistically solves. The second is complexity, characterized by the amount of ecosystem coordination required – the quantity and diversity of actors and stakeholders that must collaborate to create value with the technology. For example, a social network with a single member is useless; its value increases only when your friends, family, colleagues, etc. have signed up. Other users of the application must be ‘converted’ to generate value for all involved. The same holds true for distributed ledger technologies like Bitcoin. And, as the scale and impact of such applications increase, large scale uptake will necessitate major social, legal, and political change.

Virtual currencies must be perceived as simple, instinctive, and easy to use even in the most functionally and financially illiterate parts of the world. Talking heads often promote financial literacy and educational programs as the lynchpin in transitioning poor people to technology-based money. But the most effective adoptions happen when people learn by imitation. So, to truly demonstrate its value, Bitcoin must become ubiquitous. People should observe its use by rich and poor alike, and in developed and developing countries, in really similar ways. No one offered Internet literacy classes or programs when the technology was introduced 30 or so years ago, but Internet usage skyrocketed as the costs fell sufficiently low. Now more people use the Internet than any other technology ever known to man. Along the same vein, Bitcoin is likely to grow when middle-class consumers start using it regularly, even when transacting with the poor. My fear is that Bitcoin and its value chain are not up to the task.

Bitcoin is a commercial application or use case, but blockchain is the foundational technology (like TCP/IP which is at the core of the Internet). And similar to the Internet in the late 1990s, we have no clue how the blockchain will evolve, but I am certain that it will. Much like the Internet, blockchain must also be permitted to grow without restrictions. This will require awareness, competency, and recognition that the core technology and the applications that run on it are not the same. TCP/IP enables several financial applications that are regulated, but TCP/IP is not regulated as a financial instrument. Blockchain should be treated similarly. While the most popular and pervasive use case for blockchain today is Bitcoin, this will not be the case in a couple of years. Had Internet regulation been heavy-handed in the initial stages, humanity would have been deprived of many innovations that have become embedded in our daily existence. Blockchain is no different. Disruptive technologies seldom fit neatly into the confining spaces of regulatory oversight, but inflexible regulatory frameworks have continually stifled innovation. Chances are that innovations in distributed ledger technologies will outpace legislation. Let’s not retard their progress.

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74 comments

Congratulations on an erudite and comprehensive survey of the use of Blockchain technology platform and one of its applications Bitcoin. I subscribe to your view that those ,with no discretionary wealth ,should be wary of using Bitcoin until the volume of use expands wide enough to spread the high risks of failure.

Your caution of the need for supervisory and regulatoery expertise ,capability and understanding of the blockchain technology should be underlined. It requires a high level of mathematics – – combinoretics.
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At the mention of regulators the key to the rise and acceptance of blockchain/cryptocurrencies will be the relationships forged with the regulators. This meeting this week between Amazon and Google with regulators signals that Fintecs have decided to bypass the traditional intermediaries to pursue the mission.

Why Is Amazon Meeting With Banking Regulators?

While the financial media has been preoccupied with the idea that the banking business is at risk of being “Amazon’d” by the blockchain, the banks themselves are worried about being “Amazon’d” by…well…Amazon…

Or at least they should be, as American Banker’s Lalita Clozel explains in a piece tracing large tech companies’ attempts to forge ties with banking regulators in anticipation of someday leveraging the vast quantities of customer data to outmuscle the banks in their own industry. Meanwhile, even the most optimistic cryptocurrency enthusiasts concede that blockchain technology continues to grapple with issues of scalability that, for now at least, will make it incredibly difficult to compete with banks.

A group of companies that includes Google, Facebook and Amazon recently formed a lobbying group to help them explore the feasibility of entering businesses like lending and loan-intermediation.

Technology giants like Google, Amazon, Facebook and Apple are showing an increasing interest in engaging with federal banking regulators, a move that underscores Silicon Valley’s growing involvement in the financial services arena. In recent years, such firms have formed a lobbying group, Financial Innovation Now, that is staking out their view on various hot-button topics. But some firms are also meeting individually with government agencies.

Furthermore, both Amazon and Square have taken meetings with the OCC.

For example, Amazon lobbyists met with the Office of the Comptroller of the Currency starting in the second quarter of 2016, and again this year to discuss “issues related to mobile payments and payment processing, financial innovation, and technology," according to publicly available lobbying disclosures.

PayPal, meanwhile, met with OCC officials in the second, third and fourth quarters of last year to discuss “mobile payment innovation” issues related to underserved customers and remittances and money transfers, according to its disclosures.

Even before this latest lobbying effort, both companies had already launched forays into small-business lending (Amazon’s SB lending businesses saw its revenue double over the past year). Apple, meanwhile, has for years been lending to customers hoping to purchase its products. But before deciding whether to expand their financial services offerings, tech companies must first understand what regulatory obstacles might exist.

“People are kicking the tires,” said Lawrence Kaplan, a bank lawyer of counsel at Paul Hastings. “People are asking questions: What does this entail? Can you get us up to speed if we want to pull the trigger?”

In the spirit of helping to shepard financial innovation, the OCC earlier this year created a national fintech charter that financial technology (and big tech) companies can use to circumvent certain restrictions, easing their transition into the financial-services business.

The charter, Clozel notes, was adopted after an aggressive lobbying campaign by large tech companies. One of the most logical applications for leveraging the vast troves of personal data routinely harvested by firms like Facebook and Amazon would be intermediation – or connecting customers with lenders for a small finder’s fee.

Large technology firms are “really interested in the intermediation piece, where you have access to all that data,” said Paul Nash, the former senior deputy comptroller and chief of staff under Comptroller Thomas Curry, who began discussing the possibility of a fintech charter early last year. “All of them are thinking about it.”

The next lobbying objective for big tech is to convince regulators to force banks to provide access to their financial data through an Application Programming Interface, or API, that would allow tech companies like Amazon to create almost instantaneous connections to banks’ transaction processing networks, allowing them to take over more consumer-facing businesses.

In summary, while many a think piece has been written about financial services companies and banks trying to become more like technology firms, the irony is that tech firms are also trying to be more like banks.

“There’s been lots of interest by financial services firms in technology companies and fintech companies,”said Kevin Petrasic, a partner at White & Case. “Some tech firms are now looking in the other direction.”

In other words, it’s only a matter of time before Amazon Prime customers will be able to make purchases on Amazon’s marketplace using an Amazon credit card.

Thanks, this is a well thought out article by Nigel Harper. He has a deep understanding about financial services, products, institutions, markets, delivery channels. He has a good sense as to the current state of their evolution

He gives a critical, balanced, view about issues connected to evolving electronic financial services, especially in the Caribbean, the global influencers.

It serves as a counterpoint to your lady from Trinidad who has been too well supported here on BU and especially by some in politics desperate to find something to pretend to be their own creation as the established order goes into a cul-de-sac, of their making.

Our own has been that Bitcoin technologies maybe currently useful in small networks. That mass adaption could only arrive much later.

We have suggested that a public cooperative bank, using fiat money, should be the main instrument for mass empowerment and a condition precedent to the wider involvement in crypto-currencies

For us wealth has to be first created for the masses before an emergence into mass diffusion into Bitcoin, block chain technologies etc

All the players involved with this technology will readily admit that it is at a nascent stage. Today some of us are updating iOS11, who would have thunk it all those years ago when we used the Commodore 64 to play Atari games? We live in a world that is being dragged kicking and screaming by technology, it is what it is. Stay tuned!

One can see why Marla was recruited to Bitt Inc, she will open the doors to the regional central banks, Rawdon can possible do same extra regionally. A look at the pic shows the young company has been able to attract some young bright minds. Good luck to them!

Bitcoin is flawed. Limited to 21 million, sucking in fiat supply that is being expanded by nearly every Central Bank that matters. New coins aren’t produced fast enough….the value of each coin goes up up. There is little incentive to spent the bitcoins. The earliest adopters horde and gain the most. Look I love the idea of cryptocurrency but Bitcoin is not the one. It’s a scam, Ponzi. Here is its history, parabolic run up, crash ( profit taking) rinse and repeat. I cooled on bitcoin after Mt Gox ” hack”. Eventually it will be revealed for what it is, don’t think China knows the true motive behind its creation? Think again.

I find it difficult to understand: how, if you own nothing, produce nothing, grow nothing, have nothing to sell except a seat in the sand or a dip in sea water, bitcoin will be the answer to your problems?
smoke and mirrors..
Sleight of hands
transfer of wealth from the left hand to the right hand and a few coins disappearing in the pockets of others (transfer fees)

This is a very thorough article and, for transparency’s sake, I am the CEO of a tech startup using (for ease of understanding) an alternate bitcoin to raise funding.

As an emerging technology, cryptocurrency (bitcoin and other ALT coins) is disrupting banking and the predatory companies, but there remains a huge issue with not only the ability to spend it to purchase local goods, but to create systems to allow the unbanked to access it. I’ve heard of a few that allow users to find each other and complete the transactions peer-to-peerr, but until we can get more users with wallets and the ability to be solutions for each other, the process will stay a slow rate of adoption, I’m afraid. I have a few ideas and am working with other cryptocurrency companies who understand the need, hopefully speeding up the process of adoption.

I’m getting ready to head to Antigua in the next month to see if we can be of assistance (as a company) in the rebuild of Barbuda. I’ll need help, but our ultimate goal is to be a part of this financial solution. If I can help a farmer keep more of his hard-earned money, that’s vastly rewarding.

One can see why Marla was recruited to Bitt Inc, she will open the doors to the regional central banks, Rawdon can possible do same extra regionally. A look at the pic shows the young company has been able to attract some young bright minds. Good luck to them!

Gazer…it`s still in its embryonic stage, has not been fully developed let alone perfected in any form, but your understanding of it basically sums it up…as it now exists..only dark web users benefit significantly until the law catches up with them.

the blockchain is the real deal, but that too is being picked apart by the very wealthy to find weaknesses to see how best to manipulate…

I suspect that they are unbanked because they have no money. Bitcoins will not magically put money in their pockets so they can complete transactions. In fact, I suspect the unbanked will find it even harder to be included in this new financial structure.

South Korea has banned ICOs, the up-and-coming method of raising funding via crypto tokens, due to concerns over the potential for financial scams.

China’s Central Bank became the first to outlaw ICOs, which are also known as token sales, in a move made earlier this month and now Korea is following suit.

Companies from across the world have raised more than $1.8 billion this year to date via ICOs, which involve the sale of a newly minted crypto coin based on Ethereum to finance the development of a product. The space is not regulated like mainstream financial markets and that has attracted widespread criticism for its potential to deceive investors, who are not required to be accredited in any way.

Regulators across the world, including the U.S., Singapore, Hong Kong and UK, have warned companies contemplating an ICO that they may violate securities laws. Those investing have been cautioned that they may lose their money

ICOs are different from IPOs in that ICOs can be offered by firms that are mere start-ups, even those without a product, whereas IPOs must be offered by established firms. Investors in ICOs receive a token that can be exchanged for cash when a listed firm becomes profitable, but may result in no returns at all. Tokens are not regulated–ICOs can also be carried out without abiding by strict regulations, while firms that IPO must submit numerous documents to the authorities.

The heart of the matter is that investors may not have sufficient information or expertise to judge whether ICOs are a good investment, nor even whether the exchanges on which ICOs trade are above board. Investors do not necessarily know whether the ICO prices accurately reflect the firm’s potential, or whether they have been inflated by insiders.

In China, regulators are also concerned about the use of ICOs for illegal financial activities, such as illegal fundraising, scams, fraud, and even criminal activities. Tokens are viewed as a means for companies to raise funds by skirting the securities law. In some ICO cases (link in Chinese), issuers were found to lack even a registered company or a real project.

Implications of the ban

The ICO ban will have a very negative effect on some cutting edge blockchain-based technology firms, such as Viewfin, which I covered in July. These firms will no longer be able to raise funds before they have a final, vetted product on the market, and will have to seek funding from venture capitalists or other sources. Some of these firms are working very hard to come up with a viable product, and deserve funding. Using ICOs seemed like a democratic, cutting edge method of getting financed, especially for open source, collaborative projects. The new crackdown will make it harder for innovative firms to survive. What is more, previously issued ICOs must be “deflated and properly disposed of” and may be subject to investigation for illegal fund-raising activity.

This will also adversely impact the development of new blockchain applications. These applications have the potential to disrupt the way the world does business by improving security, documentation and legal transactions, data storage, and financial transactions. China’s new ICO ban doesn’t forbid the development of blockchain technologies altogether, but it does create barriers to obtaining funding and dampens confidence in the ability to grow in an environment of rapidly changing regulation.

Were Chinese ICOs really so dangerous that they deserved to be banned?, I believe that in some cases the ICOs reflected malicious groups trying to take advantage of the new system, but that regulators would have done better to regulate ICOs rather than forbid them altogether. The ban may usher in a climate of fear among innovative firms, which could result in declining Chinese participation in the blockchain world. Ultimately, that is an undesirable outcome.

Last comment.
I am not a Luddite. I welcome and embrace new technology. But please make promises that you can keep.

I doubt if the effect of these new technologies on the Caribbean economy can be as great as promised. If you are going to shave a few bucks off the cost of transferring money, internationally, then say so.

@ TheGazer October 8, 2017 at 9:09 AM
“Let me again profess my ignorance on these matters.
I find it difficult to understand: how, if you own nothing, produce nothing, grow nothing, have nothing to sell except a seat in the sand or a dip in sea water, bitcoin will be the answer to your problems?
smoke and mirrors..
Sleight of hands
transfer of wealth from the left hand to the right hand and a few coins disappearing in the pockets of others (transfer fees)
I alreddy tell ya dah I igrunt..”

After rummaging through this blog I saw your post hidden in a moneybag made from a cloth of pure commonsense.

An excellent piece of foresight gazing into this reincarnated dot.com hype type medium of exchange.

I can appreciate the advanced technological advantages this crypto-currency can have over the current paper and plastic based trading systems.

But to expect junkyard Barbados and other “small-island” Caribbean nation states whose only wealth generation activities are based primarily on sea, sand and servility aka Tourism (or in Bush Tea’s brass-bowl tinted nomenclature, ‘sophisticated prostitution’) to be players of significance in this trading in the store of value is (to coin a phrase) to stretch the imagination of reality a bit(t) too far.

What would Barbados be putting up as store of wealth or ‘resources-based collateral’ to back any crypto-currency other than “In God we believe” written on parchment made from hemp leaves to settle its international debts incurred in the importation of hundred of millions in food and consumer goods?

Hal Austin October 8, 2017 at 11:25 AM #
One can see why Marla was recruited to Bitt Inc, she will open the doors to the regional central banks, Rawdon can possible do same extra regionally. A look at the pic shows the young company has been able to attract some young bright minds. Good luck to them!
Is the attraction possible unemployment?

This does not represent my views. I have said we must be cautious of this new disrupter. I suspect the abuse of the technology to associate people with certain controversial views.

Absolutely agree that this technology is at nascent stage (in-house, we’re working with artificial intelligence and virtual reality too, so nascent technology in every corner of our platform when the crypto is also a part).

It’s probably unfortunate that crypto didn’t have a few more years before this recent craze that may very well cause people to invest without doing enough due diligence, possibly due to the fear of missing out (especially when I see it being compared to the tech bubble). More time might have allowed for more adoption and a bigger group of active users to further the useability in the physical world. Until I can use it with the same ease as my cash/cards to buy a loaf of bread there will be a slow uptake of this tech (even for me–I have ETH to pay clients and vendors and cash so I can buy dinner).

Regulations will certainly help (the RIGHT regulations) but then, individuals still need to be prudent. For us (as a company), education is important so our community can understand how the crypto works well before they get involved.

If by robust we mean an ability to advance all human beings, especially the poor, the dispossessed

Then the philosophical underpinnings of libertarianism, its founding and more importantly its stances on other pressing social-political-economic issues may serve as a reliable guide as to the genuine intent of such an initiative, such as bitcoin tech.

Robustness of technology can be easily bought, keeps changing in the short term but in and of itself should never be enough to justify a reckless lurch into foolishness.

David, this debate started with an excellent, comprehensive article and has gone into a tangled Web of conflicting notes, views that move the discourse totally away from its moorings and some rather confusing remarks also.

What is the significance of saying this is nascent tech? Does that mean that there are too few adopters as some have noted above. Does it mean that the tech has not evolved enough that the everyday citizen can take full ; or does it mean that the ‘establishment’ will do all possible to stop the growing tech from reaching full adoption….

I pose those simply to highlight that we are in an era of many nascent ideas and tech deveopments and whether they are fully adopted is a function of market dynamics…as always!

At its core who supports or propogates Bitcoin is relevant as an intellectual exercise only. The fact is that it has taken hold in the finance arena and will be exploited by those players…for good or bad… until adopted or rejected by society.

If it moves beyond the current areas of use into main stream [and remember one major US bank CEO has called it a scam whereas folk like Goldman Sachs seems very interested in exploring product offerings, and teams are vying to offer exchange traded fund preducts (ETF) ] then it’s impact on life in the region can surely be explored in depth but for now this is truly very esoteric for the average Theophilus and Mabel.

Bitcoin and crypto currencies is a major world changing proposal. Period.

Some electronic based money system that expands the entire eco-system of money transfers, credit cards and the like is intriguing and eventually UNAVOIDABLE. Maybe this is it…maybe not.

Moreover this does not solve any issue for supposed unbanked small farmers or clothiers … As far as I know that basic need was resolved many times over with other methods … in some cases far away in Africa or fields in Asia due to the ubiquitous credit card based technology based on the expansion of wireless services from the work of Google, Bill Gates foundation and Oprah to name three major benefactors.

There have been multiple payment platforms around us with PayPal being one of the most ubiquitous…crypto currency in simple terms takes that like an Elon Musk rocket to an entirely other planetary level.

"I’m Gabriel Abed and I’m a founder of Bitt, a financial technology company that builds software, procedures and policies for central banks to provide them with the capabilities for digital dollar issuance.

I was invited to speak on behalf of our work in the Caribbean, with regards to Central Banking and specifically Blockchain Technology. Bitt, founded in Barbados, was one of the first companies in the world to develop solutions on top of the bitcoin blockchain and THE first company in the world to work with a central bank on a digital dollar standard.

Now with my limited floor time here today, I turned to my CARICOM colleague, Ambassador Friday, for guidance on what to say to this audience in such a short time and space? How do I explain the complexities of the inept Caribbean financial system and then explain the intricate world of blockchain. Ambassador Friday retorted with "The key thing is to convey a sense of possibilities".

With a few minutes left, I would like to paint a mental picture of a developing region utilizing it’s existing architecture to lead the global market.

Imagine this region utilizing the highest mobile, smartphone and internet penetration rates in the world, to empower it’s people by making them global financial citizens.

Now think of adding one enhancement to this already advanced and robust network of cellular phones and personal computers that would immediately provide growth, sustainability, trade-incentivization, transparency, immutability, integrity and trust.

Ponder on the concept of making small tweaks to our governance and legislative policies which could trigger growth cycles resulting in an eruption of economic empowerment.

Think of the possibility of every citizen and corporation, of an entire region, connected directly through a common network, governed by rules of mathematics, trade and economic value in the same fashion we connect via email, Facebook or Skype. Ubiquitously and Instantly.

Think of the possibilities of a standard towards an efficient and dynamic architecture to support Central Banks and Governments to achieve bilateral currency swaps, multilateral clearing facilities, trade weighted index currencies, and benchmark currencies, all driven through the trust in mathematics. Think of the possibilities when intraregional trade isn’t hampered by the availability of hard currencies in addition to not having to use the USD for intra-regional transactions.

I’d like you to imagine the monumental gravity and importance of a direct financial connection which would lessen our susceptibility to the very real and urgent threat of de-risking, brought upon us from a foreign centralized network.

With the problem of de-risking creating financial uncertainty for our entire region, it is imperative that we finally, and quickly, embrace blockchain technology. It is the way through derisking and the way around it to avoid being de-banked from loss of correspondent relationships.

Just think of the possibilities.

Blockchain is not a fad and it is certainly not going away. It is pure mathematics that is representative of yet another spike in the novelty curve of human civilization. Just as we have seen with smartphones, the internet, or the industrial revolution. These today, are nothing more than a novelty to us. Most, we don’t give a second thought to. And like these, Blockchain will be integrated into every facet of our lives.

In an economic zone mired in stagnant growth, ravaged by natural disasters, crippled by foreign payment systems, broken by the burden of cash, there you have it, the possibilities and promise of hope. It’s now up to you to decide what part, in the coming reality, you will play in this evolution, known as blockchain.

We, at Bitt, are leading the way in the Caribbean and we’re available to the Small States in this forum as your experts in blockchain, committed to the empowerment of every man, woman and child.

“Bitcoin is different than any currency you’ve used before, so it’s very important to understand some key points. Unlike government issued money that can be inflated at will, the supply of Bitcoin is mathematically limited to twenty one million bitcoins and that can never be changed.”

Sending out an SOS
————————————HELP! HELP! HELP!——————————————-
So with over a billion people on this earth, some of us will be without bitcoins?
Will this artificial scarcity push up the price?
Will it be just another kind of Gold? Precious, but not everyone has it?
Cannot see how this will rearrange the deck chairs on the T̶i̶t̶a̶n̶i̶c̶ Caribbean

Thank you. That was a well thought out presentation of the problem at hand and one of the clearest statements of what Bitcoin and cryptocurrency are to those unfamiliar to the subject. I agree with your summation. Bitcoin use will not make it to the unbanked nor will it survive real-world tests where its use, space and time make a difference.

As with all things new, the adoption rate of any product/service will have its attendant issues.

The insights provided about the dangers of this exciting arena being experienced globally by this product are all pertinent.

We cannot ignore that there are serious downfalls for our economies arising from electronic collusion, or internet hacking et al. but here is a thought for consideration that even goes a step further back

“The Angle of Your Dangle”

For those males among us who know what that means you appreciate that as we age, some of us have a disability to “get it up” and gravity starts to impact on our imaginations and the hallucinations of our prowess.

Yet the actuality of that lurid example above should be examined in the context of the natural challenges that older, and usually, less suave Caribbean denizens face with these new horizons.

It is these “old menses” (and their female counterparts) who abound in either our governments or private financial institutions who, for the most part, constitute the “institutional” decision makers

It is these less au fait citizens who facilitate the so called inclusion that this modality of e currency needs to be integrated into our respective Caribbean countries.

We need to be realistic and acknowledge how, as a result of this natural and progressive phenomenon, how wide the gap is for many governments to seriously engage with bitcoin

One needs not look too far to determine the paucity of skills when we juxtapose how the NIS system operating platform crashes every other month, how pension checks can’t be issued because of a computer glitch (not bit**) or how successive government facilitators are yet incapable of understanding the most basic of computer enabled ecosystems

But if you want to determine if what De ole man is saying is true just observe how The financial institutions rather banks are even now downsizing their Caribbean based operations

If conventional banking is firing management staff whom they contend are failing in simple paper banking activities do we really think that they would support any investment in this budding crypto-sector?

And the response is no.

a review of the resident ability of both administrators as well as the average regional citizen to first of all understand what crypto currencies are, and thereafter make the quantum leap to begin to use it, shows that such skills are lacking,

However De ole man respectfully suggests that bitcoin and crypto are a virtual innovation that IS NOT PRESCRIBED BY ANY PHYSICAL BOUNDARIES AND ENSUINGLY DOES NOT NEED TO FEAR THESE CONVENTIONAL BARRIERS

@Pieces, re “However De ole man respectfully suggests that bitcoin and crypto are a virtual innovation that IS NOT PRESCRIBED BY ANY PHYSICAL BOUNDARIES AND ENSUINGLY DOES NOT NEED TO FEAR THESE CONVENTIONAL BARRIERS”

Let’s repeat the problem part: “PRESCRIBED BY ANY PHYSICAL BOUNDARIES…. DOES NOT NEED TO FEAR THESE CONVENTIONAL BARRIERS”

The entire crypto currency model evolved to circumvent current banking/payment models and “THESE CONVENTIONAL BARRIERS” of which you speak.

Yet, unless and not a day before the entire process is properly accepted within the same financial models will it be anything more than the current roulette heel of speculative investment that it is currently (bitcoin, anyhow).

Thus day when you or I can actually use a crypto currency to buy $100 of basic foodstuff of bread, milk and some kale😊 is a ways off, yet …despite the apparent explosion in use in places (high end) such as Nigeria.

Of course the Kenya model noted above is NOT crypto in the least so irrelevant re adoption of this new model.

The article though informative, was writing a year ago, much has transpired since
and tweeked, regulating the technology, “insuring and Pegging” creating investor trust… Much has happened since 2017, much is constantly happening, corporate investment is on the rise…

Bitcoin’s brief life as a digital currency here is headed for an abrupt end as financial technology firm Bitt informs customers it is shutting down its Exchange and Wallet in two months.
Bitt customers will no longer be able to sell and buy Bitcoin via its Exchange and Wallet service come August 29. Account holders were urged to close their bitcoin accounts.
In a statement, the fintech firm advised: “After years of serving you, the Bitt Exchange will cease all operations at 4 p.m. on August 29, 2019. Since you will no longer be able to sell or buy Bitcoin via this Exchange, we ask that you close your account with us before that time and date.”
Bitt said it was closing the Exchange service to focus on its blockchain-based central bank digital currencies and Mmoney retail transaction business.
Chief Financial Officer Patrick Hidalgo told Barbados TODAY: “We had the Bitt Exchange and Wallet, we have the Mmoney Wallet, Mmoney Merchant, License Financial Institutions Solutions and Central Banks Solutions.
“So of those five we are just taking away one. That means that none of those other components of our business have anything to do with cryptocurrencies.
“We are closing it so that we can focus on blockchain-based central bank digital currencies and Mmoney.
The company said it expected to send further notifications to its customers.(Quote)

Article mentions some guys we never heard of. It does not mention the people they “big-up” in earlier stories.

My investment team tells me that this group may have dumped their personal holding and headed for the hills. I have asked the team to prepare a special report. They suspect that this group got in before the current price and may have made some money. My investment and reporting team are following up on those who bought bitcoins using this exchange and lost money. Were they viictims of a sophisticated pump and dump?